Dingjiaoone original.
Author |Dawn.
Edit |Wei Jia.
Among all the new car makers, NIO was one of the biggest changes last year.
In 2023, NIO will sell 160,000 vehicles, release NIO mobile phones, obtain independent car manufacturing qualifications, and get large investments from the Middle East. The price is a loss of 21.1 billion yuan.
In the latest financial report released on March 5, NIO's revenue in 2023 will be 55.6 billion yuan, a year-on-year increase of 129%, but the net loss widened by 45% year-on-year.
Before the winter of last year, Li Bin spent two months holding more than 30 analysis seminars at the company to determine the business plan for the next two years.
Subsequently, NIO announced a 10% layoff, about 3,000 employees left their jobs, and some unprofitable projects were postponed and cancelled, which saved NIO about 2 billion yuan in costs. At the same time, NIO vigorously recruited sales personnel, and more than 3,000 people were hired in two months to sell cars.
A series of adjustments have increased concerns about NIO. Some people are worried that NIO will fall into a serious cash flow crisis like in 2019, and some netizens even asked "when will NIO collapse" in Li Bin's live broadcast. Li Bin has reflected in public many times and has a frank attitude.
However, any negative emotions can be amplified, and facts can also be distorted in the dynamics.
2023 is not the best time for NIO, but it is also not the worst time either. Just like Xiaopeng in the winter of 2022, it was also embattled at that time, and Chairman He Xiaopeng personally went down to change and survived a crisis. Now NIO is in a critical period of adjustment, and the situation may reverse at any time.
It is worth asking, what has been NIO's response strategy in the past year? When will there be a turnaround?
Last year, NIO did a lot of things and lost a lot of money. According to Li Bin, for various reasons, it was more than expected thanks to 10 billion.
NIO's money is first spent on product upgrades.
In 2023, the old ES8, ES6, and EC6 will all switch to the second-generation platform, and NIO will also release the EC7, ET5T, and ET9. It is equivalent to sending six cars a year and completing the second-generation platform switch.
The process is hard. It's like changing a tire at high speeds, which on the one hand disrupts the rhythm and increases the cost. To use a phrase in the industry,"To send a new car is to beat yourself".
Ideal had a lesson two years ago. At that time, the 2022 ideal one was going to be listed, ** had not been delivered, the old model could no longer be sold, and the old car owners began to defend their rights, and the ideal delivery volume of the month went from more than 10,000** to more than 4,000. Immediately afterwards, because of the early release of the ideal L8, the ideal ONE could only reduce the price, accelerate the depreciation of raw materials and inventory, and directly lose 800 million yuan.
It can be seen how big the product switch has brought to car companies. This is only one car, and NIO is three, behind which is a huge investment in fixed assets and R&D expenditure, as well as the loss caused by switching.
More money is being spent on new businesses.
Making mobile phones, making batteries, developing chips, and building battery swap stations, any of which are all tens of billions of capital investment, and NIO is doing it at the same time.
NIO Phone, the first mobile phone developed by NIO, was officially released and delivered in September last year, and it is now available for purchase. Counting on this phone to make money, that's impossible. It's just that because mobile phone manufacturers are building cars, mobile phones and car machines need to be interconnected, and NIO has done it on its own.
NIO's battery has been in development for more than two years. From spending 200 million yuan to build a laboratory in Shanghai, to building a battery production base in Hefei, NIO has invested a lot of money. This money has become plant, equipment, raw materials, R&D patents, which have not yet been mass-produced.
Chips are businesses that require long-term investment and are difficult to achieve results in the short term. The common practice in the industry is to purchase chips from third parties, but NIO chooses to build its own team and develop independently.
The above new businesses have large investment amounts, long return cycles, and uncertainties. Regardless of the form of their products, they will eventually be used in NIO's cars, and they will recoup their investment and make money by selling them. Until then, it's all about cost.
Looking at China, no new force has spent so much money on research and development like NIO.
According to the financial report data, NIO's R&D expenditure has increased year by year, reaching a maximum of more than 4 billion yuan per year before 2022, directly jumping to 10.8 billion yuan in 2022, and as high as 13.4 billion yuan in 2023. In contrast, Ideal will vigorously promote R&D in 2023, spending a record 10.6 billion yuan, but there is still a gap with NIO. It should be noted that NIO's revenue is less than half of the ideal.
It may not be until many years later that we can objectively assess whether NIO is worth the money spent on R&D, which in itself is a future-oriented investment that cannot be measured by short-term performance.
Putting aside the calculation at the business level, NIO is indeed a company with a long-term plan. Li Bin said that since 2019, the company has a five-year strategic plan. NIO is planning its current layout with a vision of at least five years. Of course, this only requires the company to have enough money.
The problem that NIO will encounter in 2023 is that the money on the company's account is not sufficient, and the main business, selling cars, has not improved much.
Selling cars is the engine of the company's development, and the cost sharing and cash flow maintenance are all driven by the income contributed by the sale of cars. Selling 20,000 cars a month can give NIO about 6 billion yuan in cash flow. If sales do not grow, NIO's engine will run out of fuel or even stall, and problems in each chain will be exposed.
So in November last year, Li Bin finally took action.
The core of NIO's series of adjustments is to streamline business, reduce costs and increase efficiency. In other words,NIO is going to have a tight life.
NIO merged some redundant departments and positions, eliminated inefficient positions, and laid off 10% of its employees, about 3,000 people. In addition, projects that cannot improve the company's financial performance for three years are cut or postponed. "The money that should be spent is resolutely spent, and the money that should not be spent is resolutely saved. ”
Strategically, NIO has abandoned "long-termism" and shortened the planning time span from five years to two years. Li Bin figured it out: "(Long-termism) will paralyze the ...... of our colleaguesIt's not an excuse not to do a good job in short-term implementation", "If the strategy doesn't meet expectations, but the money has been spent, it will bring a lot of business risks." ”
According to Li Bin's calculations,With the reduction in the number of employees, these measures will save NIO 2 billion yuan in 2024.
In the fourth quarter financial report, cost reduction has been reflected to a certain extent. NIO's automotive sales revenue increased by 4 percent year-on-year6%, the cost of car sales decreased by 11%。Although the magnitude is small, the intent is clear. More obviously, the two major expenses - R&D, sales and management, the growth rate in the fourth quarter was the lowest in the year, and the growth rate of total operating expenses was controlled at 74%, well below the previous three quarters.
In the past, in the "Wei Xiaoli", the human efficiency of Weilai was the lowest, and now Weilai should be on par with the industry average.
The way batteries are made has also changed. Batteries are divided into R&D and manufacturing, and the manufacturing process has a large investment in the early stage, and the production capacity is full, and the company's gross profit margin cannot be improved within three years.
Source: NIO's official Weibo.
The general idea is: insist on exchanging gross profit with R&D, scale and management, and refuse to exchange fixed assets for gross profit.
Cost savings are one thing, but more importantly, it is to increase sales.
At the product level, throughout 2023, NIO will be struggling to cope with model replacements, and its product matrix will fall into chaos.
He Yuhua, the founding partner of Hegao Capital, once told Dingjiao,NIO has a multi-product strategy, and there will even be overlap or competition between products, resulting in mutual erosion. In terms of product pricing and positioning, NIO first needs to clarify its positioning for consumers. If there are too many products and the sales of a single product cannot go up, the company's overall net profit level will be affected.
NIO's development last year confirmed He Yuhua's judgment. Li Bin reviewed at the end of last year and said that the biggest strategy of the automotive industry is product war, if it can be repeatedProduct planning, positioning, and details should be done better. These mistakes must have cost NIO a few thousand fewer cars, but that's the cost of tuition.
NIO suffers from the fact that it spent a lot of time and money on the research and development of the second-generation technology platform, and completed the model switch with great sincerity, but the sales system could not keep up when selling the car.
For example, a car that has already been pre-sold cannot be delivered. The ET7, the earliest model of the second-generation platform, and the ET5 launched later, have all had cases where users placed orders, but NIO was unable to deliver the car for a long time, and finally users returned the order and changed it to other competing models. Later, NIO learned from the pain, and the new model was delivered as soon as it was launched.
The sales capacity of the store is also insufficient. All of NIO's stores are directly operated, and its layout in prefecture-level cities is not very deep, and the number of stores is also far behind that of BBA. In the past, there were product expert positions in Weilai's stores, and the Buddhist reception was not enough, but later Weilai changed to the sales staff to receive the whole process.
Li Bin regards "late sales ability" as the biggest lesson in 2023. Some of the intended orders were not accepted, and some of the orders that arrived were lost. As a result, in the fourth quarter of last year, NIO recruited more than 3,000 sales consultants in two months, with an overall team of more than 5,000 people.
NIO's sales are trained for the first month and a half after joining the company, and only after the training can they officially start selling cars. The effect of the adjustment of the sales force will not be reflected until this year.
The new car industry will officially start the knockout round in early 2024. For NIO, the upside is that the problems are exposed in advance and the time window for adjustments is gained, and the downside is that the effect of these adjustments is uncertain.
The lack of independent car-making qualifications used to be a thunder for NIO. Li Yinan's self-traveling home was forced to stop production because he didn't have the qualifications. But in December last year, NIO spent 31600 million yuan bought the equipment and assets of two factories from JAC, andSuccessfully won the qualification of independent car manufacturing.
Li Bin said that from OEM to self-manufacturing, NIO's manufacturing cost per unit of vehicle (non-vehicle cost) can be reduced by about 10%.
In terms of funding, NIO has stockpiled some ammunition in advance. CYLN Holdings, an investment institution from the Middle East, invested in NIO twice in a row last year, and gave NIO 7$38.5 billion in cash, $2.2 billion for the second time. In addition, NIO issued a convertible senior bond to raise US$1 billion.
The injection of nearly US$4 billion (28.4 billion yuan) is enough for NIO to spend some time.
In order to get the investment of CYVN, NIO took out two seats from the board of directors and made CYVN the largest single shareholder, but Li Bin is still the actual controller with super voting rights. It's just that CYVN's two investments in NIO are currently losing money, and its first stake is 8$72 shares, the second "** is 7."$50 shares, and now NIO's share price is only 5$48 shares.
Next, there are two metrics that can be used to measure the effectiveness of NIO's transformation – delivery volume and gross margin.
These two indicators are contradictory to some extent, and the most common way to play in the industry is to sacrifice gross profit margin (price reduction) to pull sales, and the first battle has been fought since the beginning of this year.
NIO doesn't want to participate in the ** war, and it can't afford to participate. Li Bin set the tone: to give up two illusions, one is to give up the illusion that the market competition is not miserable, and the other is to give up the illusion of exchanging price for quantity, but to improve the gross profit margin and improve the ability of the sales service system in exchange for the increase in sales.
Giving up the price reduction, NIO can only rely on products and channels, and the challenge is not small.
Monthly sales of 20,000 units is a threshold in front of NIO, which may not be completed until the second quarter at the earliest. In the latest financial report, NIO gave a sales guidance of 3 for the first quarter10,000-330,000 units. NIO delivered a total of 18,187 vehicles in January and FebruaryThis means that NIO's deliveries in March will not exceed 150,000 units.
Li Bin said at the fourth-quarter financial report** that the new brand for the mass market will be released in the second quarter, and the first product will be launched in the third quarter. This model is comparable to Tesla's Model Y, but the price is 20% lower, and it will be delivered on a large scale in the fourth quarter. This car is mainly responsible for the volume task, and the NIO brand is responsible for ensuring the gross profit margin.
The improvement in gross margin can be tracked through the quarterly financial report.
2021 was the time when NIO's gross profit margin was the highest, once exceeding 20%. Subsequently, due to the increase in the price of battery raw materials and the switch between new and old models, NIO's gross profit margin continued to decline to single digits.
Now, the second quarter of last year was the lowest point. NIO's gross profit margin returned to double digits in the third quarter and further recovered to 11 in the fourth quarter9%, which is a good sign.
Next, NIO can only cope with fierce competition by raising its gross profit margin.
Battery swapping is a story that NIO is trying to tell to the market. In the eyes of consumers, battery replacement is very convenient and can solve battery life anxiety; In the eyes of investors, battery swapping itself is a business model with a certain space for commercialization.
Last year, NIO launched the third-generation battery swap station to shorten the battery swap time and be compatible with new brand models, and then separated the battery swap rights from vehicle sales and began to charge separately. Since November last year, NIO has reached a strategic cooperation agreement with Changan, Geely, Chery and JAC, and the scope of this "circle of friends" is still expanding.
Li Bin repeatedly emphasized that battery swapping is not a burden for NIO, and the battery swap service itself has limited losses. According to the information revealed by Li Bin in December last year, a single battery swap station can achieve profitability with 60 orders a day, and the Shanghai area has been profitable, but the overall profitability will take several years. In addition, the possibility of independent financing of the battery swap business is not ruled out.
If NIO can really do this thing, it will be amazing.
In 2023, NIO has been "catching up on lessons", and its challenges come from external competition on the one hand, and internal organizational inefficiencies on the other. Now that the external competition is intensifying, NIO can only win this battle by adjusting the organization and overcoming the inertia of the enterprise.
Title picture** on Weilai's official Weibo.